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Oct 30, 2017

Sneakernomics: Holiday 2017 Outlook for the Sports Industry

Matt Powell, Vice President, Senior Industry Advisor ;

Sports

@NPDMattPowell

Pun intended, the holiday season is “the most wonderful time of the year” for all the major industries it touches yet, at some point in time, chances are each will be struck by a double-edged sword scenario. I see this to be the case this year for the U.S. sports industry; however, while I am pessimistic about how the business will fare overall this holiday season, there are still lessons to be learned, and an upside to be found.

The industry is currently walking in the shadows of Holiday 2016, which was the most promotional one in my memory. I anticipate that it will prove challenging for athletic brands to put that genie back in the bottle and regain control of the market this year, without some negative impact to sales. As we saw last year, steep discounting is not an effective method to drive sales and profits. In today’s retail environment, brands and retailers that are using price as their sole competitive edge are setting themselves up for failure.

Easier said than done, it’s time for the industry to reboot and get back to its basics. Innovation, quality, and exclusivity have always been the industry’s cornerstones, and it is the brands excelling in these areas—not in lowest price—that are also growing the most in sales. Here are some great examples.

An underdog only two years ago, Adidas repositioned itself in the U.S. market as a fresh brand with unique product to offer, and has since become the hottest brand in athletic footwear. Adidas will remain in this position for Holiday 2017, but, as no other major brands have stepped up, the athletic footwear industry as a whole will be impacted and we can expect overall sales to be soft closing out the year.

In footwear, Nike sales remain soft and, seeing as the brand represents more than one-third of the total business, Nike’s sales affect the total athletic footwear trend. If this sales trend continues, we can expect athletic footwear sales to be soft this holiday season.

Looking at specific categories, basketball is about halfway through its five-year downward cycle. The category will continue to be a drag on the industry. In addition, with a lack of compelling new technology to drive the performance business, we can expect performance shoes to remain soft for the balance of the year.

In athletic apparel, the noise from all the non-core brands has started to moderate, but there is still far too much supply that is chasing a weakened demand. This oversupply coupled with brands encouraging promotions will hurt both sales and margins for holiday.

The fall season began with abnormally warm weather, though promotions on cold weather products have already begun. If the weather does not turn soon, overall apparel sales may take a hit as a result.

I expect that smaller apparel brands will thrive, but it is likely that it will not be enough to offset the weakness from bigger brands.

The equipment business will continue along the path of soft sales, especially in terms of outdoor and golf. As participation rates decline, all categories will be negatively affected.

There is a lot of noise in the outdoor and athletic apparel space, and though it has started to moderate entering the holiday season, there is still far too much supply that is chasing a weakened demand. Many players are adding more fuel to the fire, but it is the premium brands holding tightly to their core values and rising from those ashes that will win.

Ramping up for the holiday season and looking ahead, brands and retailers cannot lose sight of the fundamentals. While this holiday season I do not expect the positives to be enough to offset declines the industry has seen overall in 2017, it’s never too late to change the game, especially with a new year just around the corner.


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Trend Presentation and Breakfast at Outdoor Retailer Summer Market

Date: Wednesday, June 19 | 7:00 – 9:00 a.m. MDT
Location: Denver, CO
Speakers: Matt Powell, Senior Industry Advisor, Sports, The NPD Group | Julia Day, Executive Director, Business Development, Sports, The NPD Group
Overview: Join us for breakfast and see where the marketplace is going and what your customers are thinking. This popular presentation will help you understand current market trends and dynamics, explore who is coming into your stores, and discover what drives them there. Get a winning advantage — a clear view of exactly what's happening in outdoor consumers' shopping trends. Breakfast will be available at 7:15 a.m., giving you an opportunity to connect with analysts and executives from our Sports practice prior to the presentation. Note: You must be registered for the Outdoor Retailer Summer Market to attend. 

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